MNI EUROPEAN OPEN: FDIC Reviewing First Republic Bids

EXECUTIVE SUMMARY

• The U.S. government has asked JPMorgan, PNC and several other financial groups, including a handful of non-bank investment firms, to bid for all or part of First Republic (BBG)
• Democratic Representative Khanna said FDIC should be seeking the “lowest-cost alternative” to rescue First Republic Bank (BBG)
• UK nurses warned there will be no quick conclusion to strikes as health-care workers prepare for a new walkout beginning tonight. (BBG)
• China's manufacturing activity unexpectedly shrank in April, official data showed on Sunday (RTRS)

Fig. 1: KBW Bank Index

Source: MNI - Market News/Bloomberg

UK

STRIKES: UK nurses warned there will be no quick conclusion to strikes as health-care workers prepare for a new walkout beginning tonight. (BBG)

POLITICS: The most senior civil servants in the UK Business Department intervened to protect their staff after officials raised concerns about a former ministers behavior. (BBG)

CHIPS: UK chip start up Paragraf ltd has bought a California-based competitor, acquiring manufacturing capabilities as well as technological expertise. (BBG)

EUROPE

INFLATION: French food price increases should start to ease by September the country’s minister for small and medium enterprises, trade and tourism said. (BBG)

U.S.

BANKS: The U.S. government has asked JPMorgan, PNC and several other financial groups, including a handful of non-bank investment firms, to bid for all or part of First Republic, as U.S. regulators try to determine how much it would cost taxpayers to take over the embattled California lender. (BBG)

BANKS: A deal on First Republic is getting close (MNI)

BANKS: Democratic Representative Khanna said FDIC should be seeking the “lowest-cost alternative” to rescue First Republic Bank (BBG)

STOCKS: SoftBank Group Corp's chip maker Arm Ltd has filed with regulators confidentially for a U.S. stock market listing, Arm said on Saturday, setting the stage for this year's largest initial public offering. (RTRS)

OTHER

BOJ: The BoJ left its major monetary policy levers unchanged at the end of Governor Ueda’s first meeting atop the central bank, as was widely expected, although made a more forceful tweak to its forward guidance than many expected. (MNI)

JAPAN: Rising inflation and an intensifying labour crunch are prodding smaller local Japanese firms to follow their big counterparts in raising pay, a move that can generate broader wage hikes and encourage the central bank to phase out its massive stimulus. (RTRS)

JAPAN: Japan's economy is expected to expand 0.2% in Q1 for the second straight quarter following solid private consumption and public investment (MNI)

UKRAINE: Ukraine had protested to key allies the European Union and Poland over restrictions on its grain supplies on Friday, before the European Commission announced later in the day that a deal had been reached in principle to resolve the matter. (RTRS)

UKRAINE: Wagners Prigozhin warns he is ready to withdraw from Bakhmut (BBG)

SOUTH KOREA: South Korea's exports fell for a seventh straight month in April for their longest losing streak in three years, driven by an extended slump in sales to China and suggesting persistent pressure on the economy from frail global demand. (RTRS)

BRAZIL: Brazilian President Luiz Inacio Lula da Silva pledged on Sunday to introduce a new policy of real increases in the minimum wage and announced plans to raise the income tax exemption for lower-income earners. (RTRS)

COLOMBIA: Colombia's central bank board raised the benchmark interest rate by 25 basis points to 13.25% on Friday, continuing a long tightening cycle amid persistent inflation and significant stability risks to the global financial system, it said. (RTRS)

SHIPPING: Ship traffic in Turkey's Bosphorus Strait is set to resume for southbound vessels as of 1840 GMT on Sunday, after a suspension due to an engine failure on one ship, the Tribeca shipping agency said. (RTRS)

COMMODITIES: Australia Pacific Coalis on track to restart a thermal coal mine in New South Wales state in the fourth quarter after it secured a supply agreement with a global coal buyer, it said on Monday. (RTRS)

OIL: Oil prices slide on Fed rate hike expectations, weaker China manufacturing data (RTRS)

OIL: The U.S. will not block a court auction of shares in oil refiner Citgo Petroleum Corp's parent, Justice Department officials told a federal court, paving the way for a potential seizure by creditors of Venezuela's most-prized foreign asset. (RTRS)

CHINA

ECONOMY: China's manufacturing activity unexpectedly shrank in April, official data showed on Sunday, raising pressure on policymakers seeking to boost an economy struggling for a post-COVID lift-off amid subdued global demand and persistent property weakness. (RTRS)

ECONOMY: China’s manufacturing activity unexpectedly contracted in April, a sign the economic recovery remains patchy and may be struggling to sustain momentum. (BBG)

ECONOMY: China’s economic recovery remains patchy with the latest indicators pointing to a contraction in manufacturing. (BBG)

HOUSING: China’s home sales rose for a third month in April, adding to signs of a recovery after policymakers expanded support for the beleaguered sector. (BBG)

TRAVEL: China’s tourism and consumer activities rose sharply on the first day of the five-day Labor Day holiday, as residents rushed to travel and spend after three years of Covid restrictions finally ended. (BBG)

OVERNIGHT DATA

AUSTRALIA APR, F JUDO BANK MFG PMI 48.0; PRIOR 48.1

SOUTH KOREA APR TRADE BALANCE -$2,620mn; MAR -$4,632mn

JAPAN APR, F JIBUN BANK MFG PMI 49.5; PRIOR 49.5

JAPAN APR CONSUMER CONFIDENCE INDEX 35.4; MAR 33.9

AUSTRALIA APR MELBOURNE INSTITUTE INFLATION M/M 0.2%; PRIOR 0.3%

AUSTRALIA APR ANZ-INDEED JOB ADVERTISEMENTS; -0.3%

MARKETS

US TSYS: Early Cheapening Holds In Asia

TYM3 deals at 115-07+, +0-01, a touch off the base of the 0-07 range on volume of ~58k.

• Cash tsys sit 2-4bps cheaper across the major benchmarks, the curve bear flattened.

• Tsys were pressured in early dealing as local participants digested weaker-than-expected Chinese PMI data published yesterday as well as Fridays US data.

• An expected deal for First Republic did not eventuate as Reuters reported that regulators have had to ask for bids to be revised although a decision is said to be getting closer.

• Ranges were narrow with little follow through on moves for the remainder of the session.

• FOMC data OIS price a ~22bp hike for this weeks FOMC meeting which headlines the week's calendar, with a terminal rate of ~5.10% in June. There are ~60bps of cuts priced for 2023.

NZGBS: Twist Flattens As Short-End Unwinds Gains

NZGBs closed stronger but off session bests, particularly for the short end. 2/10 NZGB cash curve steepened 6bp on the day with 2-year and 10-year benchmark yields respectively flat and 6bp lower. The 2-year yield was down as much as 8bp early. Without a domestic catalyst, NZGBs moved away from bests as US tsys cheapened in Asia-Pac trade.

• 2s10s swap curve twist flattens with rates 1bp higher to 3bp lower and implied long-end swap spreads wider.

• RBNZ dated OIS closed flat to 3bp firmer across meetings. May meeting pricing remained at 22bp of tightening.

• The Antipodean calendar sees the RBA Policy Decision tomorrow, with no change expected, ahead of the release of the Q1 Labour Market Report on Wednesday. BBG consensus expects some cooling in tight labour market conditions. Q1 wage growth is however expected to remain at Q4’s strong pace.

• Ahead of the release of the 2023 Financial Stability Report (Wed), the RBNZ noted in an article that NZ lending is generally at variable or short-term fixed rates, which means the potential losses for banks from interest rate movements are smaller.

FOREX: Yen Pressured In Asia

The yen is under pressure in Asia today continuing its move lower seen on Friday after the latest BoJ monetary policy decision. USD/JPY is at its highest level since mid-March.

• USD/JPY has extended gains through the session, the pair now sits a touch under the ¥137 handle and is ~0.5% higher today. Bulls target a break of ¥136.99 high from Mar 10 opening up ¥137.91 high from Mar 8 and key resistance.

• Kiwi is little changed, NZD/USD has observed a narrow 20 pip range for the most part of today's session with little follow through on moves.

• AUD is the strongest performer in the G-10 space at the margins. AUD/USD is ~0.3% firmer as is AUD/NZD which has recovered to deal above the $1.07 handle.

• Elsewhere in G-10 there has been little follow through on moves with narrow ranges observed.

• Cross asset wise; US Equity futures have pared early losses and sit a touch firmer. BBDXY is ~0.1% firmer and 2 Year US Treasury Yields are ~4bps firmer.

UP TODAY (TIMES GMT/LOCAL)